Too many bills? Too much debt? Not enough money? Many people struggle financially at some point in their lives. Unexpected incidents such as hospitalisation, losing a job, and also divorce, can significantly alter your financial situation. Yet, when there is no other way to adequately handle your debts, some folks are forced to file for bankruptcy.


Going bankrupt is never easy. It’s complicated, stressful, and emotional. Consequently, lots of folks dig themselves a deeper hole before even filing for personal bankruptcy. It is imperative that you seek professional advice relating to your bankruptcy options. There are a number of financial decisions that should be avoided at all costs to avoid ruining your bankruptcy case. This article will present some tips on things you should never do before going bankrupt.


Using Credit Cards


The first thing you should do when you’re facing financial problems is to stop using your credit cards. While it is tempting to make modest purchases like food and petrol, the reality is that credit cards have enormous fees which only get magnified when you are unable to make repayments. Along with this, making big purchases with the understanding that you will shortly be going bankrupt is considered fraud. Needless to say, small purchases are okay, but if you purposely max out your credit cards prior to filing for bankruptcy, creditors will investigate and you will wind up in a considerably worse position.


Repay Favoured Creditors


When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy. While it may sound practical to pay off as much debt as possible, the truth is that it can land you in a considerable amount of trouble! If one creditor is treated favourably over another, it is called ‘preferential transfer’ and will attract court actions which will ultimately impede your bankruptcy filing and discharge. Each and every creditor carries the same weight under Australian Law, so if you completely repay one over another, the bankruptcy trustee will file a claim against the creditor in what’s called a clawback lawsuit. This is undertaken to recuperate the money that was paid to the favoured creditor to ensure it can be spread equally among all creditors.


Lie or Conceal any Information


Whatever you do, do not lie or conceal any information regarding your financial situation. When you file for bankruptcy, you are required by Law to present complete and specific information regarding your assets, income, debts, and expenses. Failing to reveal an asset, for instance, is considered misrepresentation and you will be liable to criminal prosecution. If you are unsure of anything, speak to your lawyer and spend the time to investigate to make sure that you are giving the correct information. When it concerns money, there are computerised trails pretty much everywhere, so don’t think you can conceal anything. You might get away with it in the first instance, but it can plague you and your case later down the track.


Transfer or Move Assets


Transferring or moving assets to a relative’s name to preserve those assets from bankruptcy is a myth. As a matter of fact, transferring assets will not shield those assets in any way, and may be construed as fraudulent activity which involves criminal consequences. Selling assets to repay your debts is, obviously, a normal response to attempt to reduce the financial burden. It’s critical to keep in mind that your Statement of Financial Affairs is a lawful document, so you must be honest with your financial history or deal with the potential consequences of getting caught. You will be asked by the trustee if you sold, transferred or gave away any assets, normally for a period of one year before filing for bankruptcy. You’ll even be asked what you did with the money you obtained from those transfers, so be careful of a preferential transfer, particularly with friends and family members.


Deposit Non-Income Earning Money Into Your Bank Account


Family and friends are there to help in times of need. If you’re grappling with financial problems, it’s common for friends and family to offer money to you to alleviate the burden. Do not deposit any money from friends or relatives into your bank account, or any money that is not specifically income related such as work or dividends. It’s also important to keep work related money and personal money totally separate from each other. All of these activities can produce a considerable amount of confusion and can lead to claims of fraud when filing for bankruptcy.


As you can see, there are some severe consequences for relatively trivial financial decisions when you go bankrupt. To guarantee you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. For additional information or to talk with somebody about your situation, contact Bankruptcy Wagga Wagga on 1300 818 575 or visit